As everyone who follows the news knows by now, unemployment was up again sharply in December. Totally expected, of course, and, as nearly every economist is saying, very alarming. For instance:
"These numbers, back to back, of more than a half million a month suggest that the U.S. economy is in a freefall," said Nariman Behravesh, chief economist at IHS Global Insight. "It’s scary, and it indicates that unless something is done and done quickly to turn this economy around, we’re looking at an awful situation this year." ...
"This is unprecedented," said Mark Zandi, chief economist of Moody’s Economy.com. "It’s coast to coast. It’s everywhere. There’s really no refuge in this job market. There’s no safe place."
Not so. Just over a week from now, George Walker Bush will be unemployed, and I suspect his bank account will provide a refuge. Thanks to the Supreme Court, Bush managed to get one of the slightly less than 3 million (net) jobs created during his eight years in office. That's 375,000 jobs a year, the most pitiful record since 1939 when the Bureau of Labor Statistics started collecting the numbers.
Not just the worst record ever, mind you. But far worse. During Dwight Eisenhower's two terms, only 438,000 jobs were generated annually. But the population was half what it is now. During Bill Clinton's two terms, 2.9 million jobs were generated each year.
Some critics will argue that these are worthless statistics because Presidents don't have much to do with creating jobs. If you guessed that most of these critics are Republicans, you'd be right. And if you guessed that they gleefully report the news and take credit if job creation is going well when one of their own is in the White House, you'd be right again. We heard a lot of that glee in the second half of Ronald Regan's presidency, for instance. But job creation doesn't usually do too well when one of their own is in the White House. All the more reason for them to downplay the prosperity of periods when the President is a Democrat.
Check it out. In the past 64 years, net job creation when Democrats were President totaled 57.5 million jobs. When a Republicans were, net job creation totaled 36.2 million jobs. But even that stark difference doesn't show the the whole picture. Republicans held the Presidency for 36 of those years, meaning they accounted for an average of just over 1 million jobs generated per year. The Democrats for just over 2 million jobs a year.
That's right, average annual job creation under Democratic presidencies since 1944 has been twice as good as under Republicans. Is this correlation mere coincidence?
If you're a young whippersnapper who considers the Truman and Johnson and Nixon years irrelevant ancient history, then just take note that during the terms of the last Democratic President, Bill Clinton, 23 million net jobs were generated. That was a million and a half more than under Bush Jr., Bush Sr., and Ronald Reagan combined. More jobs in less than half the time.
There is, of course, the matter of the quality of jobs that have been created in the past two or three decades as compared with jobs created before then. But that's a topic for another discussion.
Mister Bush, who strolled into office with an official 4.2% unemployment rate will be leaving town with a 7.2% rate. But both those figures - reflecting the official rate that 99% of the media report - are bogus. Since 1994, that official rate is what the BLS has called U3.
In June, Barry Ritholtz had this to say about that over at The Big Picture:
[The official unemployment rate] has, over the years, slowly excluded many of the factors that USED to go into how the US reported unemployment. Hence, there has been a gradual decrease in the Unemployment rate that has occurred regardless of what was happening in the Jobs market.
U3 is now comprised in a way that merely repeating it without a slew of caveats borders on fraud.
The BLS definition of U3 is "Total unemployed, as a percent of the civilian labor force." But this doesn't really account for the total unemployed.
To its credit, the bureau provides an alternative measure of unemployment, which rarely gets mentioned. That particular measure is labeled U6, which the BLS categorizes as "Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers."
Employed part time for economic reasons? Those are workers who would dearly love a full-time job - who may well need full-time work to make ends meet - but can only obtain something part time. "Marginally attached worker"? That's someone who wants a job, is available for work, has looked for a job sometime in the past 12 months, but is not counted as unemployed because s/he has not searched for work in the four weeks preceding the latest BLS survey.
So what's U6 currently? As of Friday, it's 13.5%, which is a 0.9% rise over last month. Last year at this time it was 8.7%.
Among others, Paul Krugman says that U6 measures far more accurately than U3, and is closer to the historical measure than U3. Some economists argue, however, that the lower calculation given by an average of U3 and U6 is closer to reality.
But as I wrote here last month, and Reuters pointed out Thursday, other observers think even U6 undercounts the unemployed in America. And that this undercounting leads to sloppy analysis.
Most economists ridicule the idea that what we're experiencing now could ever become anything like the Great Depression. And, says Reuters, they all point to the same statistic: 25% of Americans were out of work in the worst of the 1930s and we're nowhere near that disaster.
But the definition of joblessness has changed since then. Not just in 1994, but also under Lyndon Johnson in the late 1960s, when discouraged workers out of job for more than a year were erased from the statistics. Out of work, out of luck, and out of sight.
Figures collected for Reuters by John Williams, from the electronic newsletter Shadowstats.com, suggest that, while we are not [at Great Depression levels yet], the comparison is not as outlandish as it might initially seem.
By his count, if unemployment were still tallied the way it was in the 1930s, today's jobless rate would be closer to 16.5 percent -- more than double the stated rate.
"I expect that unemployment in the current downturn, which will be particularly deep and protracted, eventually will rival, if not top, the 25 percent seen in the Great Depression," Williams said.
Is this all just gobbledygook? Does it really matter since every gauge of the unemployment rate is showing a sharply upward trend anyway? Yes. Because the change in how the official rate of unemployment is now figured over the way it previously was makes it difficult to fairly compare from year to year. And, bad as the picture that the current gauge shows, it's still way too rosy.
Politicians often prefer fuzzy accounting, like that the Cheney-Bush administration has used for the official Pentagon budget (which continues to exclude spending for two ongoing wars, the Department of Veteran Affairs and the military portion of the Department of Energy). But we citizens deserve accurate measures. An official unemployment rate that conveniently leaves out discouraged workers who want a job as well as those who want to work full time but can only find part-time jobs is as phony as a Defense budget that doesn't include the costs of Iraq and Afghanistan.
Perhaps Labor Secretary-designate Hilda Solis, if she is confirmed, can work some magic and generate some transparency in this matter.